Rational Software Reports Record Revenue and Pro Forma Net Income for Fourth Quarter of Fiscal Year 2001

Apr 17, 2001, 01:00 ET from Rational Software Corporation

    CUPERTINO, Calif., April 17 /PRNewswire/ -- Rational Software Corporation
 (Nasdaq:   RATL), the e-development company, today announced results for the
 fourth fiscal quarter and fiscal year ended March 31, 2001.
     Revenue for the fourth quarter and fiscal year ended March 31, 2001 was
 $241.7 million and $814.9 million, respectively, compared to $180.4 million
 and $572.2 million respectively, for the same periods last year.  This
 reflects an increase in fourth quarter and fiscal year revenues of 34% and
 42%, respectively, compared to the same periods last year.
     The company reported pro forma net income and earnings per share on a
 diluted basis for the fourth quarter ended March 31, 2001 of $45.9 million and
 $0.22, respectively, compared to pro forma net income and earnings per share
 of $34.9 million and $0.18, respectively, for the same period last year.  This
 reflects an increase in fourth quarter pro forma net income of 32% compared to
 the same period last year.
     "Rational's fourth quarter caps off a remarkable year for the company,
 with year-to-year growth of more than 40%," said Paul Levy, chairman and co-
 founder of Rational Software.  "The recent macroeconomic environment, however,
 did present us with a challenging fourth quarter.  Even in this tough economic
 environment, we saw excellent focus and tactical execution from all parts of
 the company, and in particular from our field sales teams around the world."
     "Our mission remains the same: help customers build software better and
 faster," said Levy.  "We believe that companies who depend on software for
 their success will continue to depend on Rational."
     The company reported pro forma net income and earnings per share on a
 diluted basis for the year ended March 31, 2001 of $147.6 million and $0.72,
 respectively, compared to pro forma net income and earnings per share of $94.5
 million and $0.49, respectively, for fiscal 2000.  This reflects an increase
 in fiscal year net income of 56% compared to fiscal 2000.
     Pro forma net income and earnings per share for the periods reported
 exclude one-time charges for purchased in-process R&D, amortization of
 goodwill and purchased intangibles and amortization of stock-based
 compensation related to recent acquisitions, as well as the net activity
 (operating expenses and interest income less portion allocated to minority
 interest) incurred by Catapulse, Inc. prior to the completion of the Catapulse
 acquisition on February 5, 2001.
     As reported net income and earnings per share on a diluted basis for the
 fourth quarter ended March 31, 2001 was $6.6 million and $0.03, respectively,
 compared to as reported net income and earnings per share of $25.9 million and
 $0.13, respectively, for the same period last year.
     As reported net income and earnings per share on a diluted basis for the
 year ended March 31, 2001 was $72.1 million and $0.35, respectively, compared
 to as reported net income and earnings per share of $85.3 million and $0.45,
 respectively, for fiscal 2000.
 
     Statements contained in this press release may include "forward looking"
 statements within the meaning of the Private Securities Litigation Reform
 Act of 1995, particularly statements in this press release relating to
 continued dependence on the company.  The actual future results of the
 company could differ materially from those described herein.  Certain risks
 which could cause actual results to differ materially include competition in
 the marketplace and dependence by the company on the growth of the market
 for sophisticated software development tools.  For a more complete list of
 risk factors, see our recent filings with the Securities and Exchange
 Commission.
 
     About Rational Software Corporation
     Rational Software Corporation (Nasdaq:   RATL), the e-development company,
 helps organizations develop and deploy software for e-business,
 infrastructure, and devices and embedded systems through a combination of
 tools, services and software engineering best practices.  Rational's e-
 development solution helps organizations overcome the software development
 paradox by accelerating time to market while improving quality.  Rational's
 integrated solution simplifies the process of acquiring, deploying and
 supporting a comprehensive software development platform, reducing total cost
 of ownership.  IDC has recognized Rational as the revenue leader in multiple
 application development and deployment markets for four years in a row.
 Founded in 1981, Rational, one of the world's largest software companies, had
 revenues of $815 million in its fiscal year ended March, 2001 and employs more
 than 3,700 people around the world.  Rational is a component of the Nasdaq-100
 Index(R).  Additional information is available on the Internet at
 www.rational.com .
 
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20010417/RATLLOGO )
 
 
                         Rational Software Corporation
                       Pro Forma Statements of Operations
          (in thousands, except percentage figures and per share data)
 
                                      Three months ended March 31
                                              (unaudited)
                              2001            %         2000             %
 
     Net product revenue   $141,565            59     $114,393            63
     Consulting and
      support revenue       100,115            41       66,026            37
       Total revenue        241,680           100      180,419           100
 
     Cost of product
      revenue                 7,531             3        7,851             4
     Cost of consulting and
      support revenue        25,907            11       19,797            11
       Total cost of
        revenue              33,438            14       27,648            15
       Gross margin         208,242            86      152,771            85
     Product research and
      development expenses   47,741            20       28,674            16
     Sales and marketing
      expenses               92,623            38       65,476            36
     General and
      administrative
      expenses               11,914             5       13,535             8
       Total operating
        expenses            152,278            63      107,685            60
       Operating income      55,964            23       45,086            25
 
     Other income, net        9,606             4        3,358             2
 
     Income before income
      taxes                  65,570            27       48,444            27
     Provision for income
      taxes                  19,671             8       13,564             8
     Net income             $45,899            19      $34,880            19
 
     NOTE:  PRO FORMA ONLY
     Net income per
      common share - basic    $0.23                      $0.19
     Shares used in
      computing per share
      amounts - basic       195,336                    179,394
     Net income per
      common share - diluted  $0.22                      $0.18
     Shares used in
      computing per share
      amounts - diluted     211,923                    197,816
 
                                          Year ended March 31
                             2001             %         2000             %
 
     Net product revenue   $477,726            59     $354,497            62
     Consulting and
      support revenue       337,209            41      217,693            38
       Total revenue        814,935           100      572,190           100
 
     Cost of product
      revenue                28,514             3       26,629             5
     Cost of consulting and
      support revenue        89,227            11       59,607            10
       Total cost of
        revenue             117,741            14       86,236            15
       Gross margin         697,194            86      485,954            85
     Product research and
      development expenses  151,655            19       98,627            17
     Sales and marketing
      expenses              321,311            39      220,529            39
     General and
      administrative
      expenses               45,171             6       47,124             8
       Total operating
        expenses            518,137            64      366,280            64
       Operating income     179,057            22      119,674            21
 
     Other income, net       31,827             4       11,628             2
 
     Income before income
      taxes                 210,884            26      131,302            23
     Provision for income
      taxes                  63,251             8       36,765             6
     Net income            $147,633            18      $94,537            17
 
     NOTE:  PRO FORMA ONLY
     Net income per
      common share - basic    $0.78                      $0.54
     Shares used in
      computing per share
      amounts - basic       188,566                    175,458
     Net income per
      common share - diluted  $0.72                      $0.49
     Shares used in
      computing per share
      amounts - diluted     206,211                    191,274
 
     The above pro forma statements of operations for the quarter and year
 ended March 31, 2001 have been adjusted to present the Company's operating
 results excluding acquisition costs related to recent acquisitions, (including
 amortization of goodwill and purchased intangibles, amortization of stock
 based compensation and purchased in-process R&D) operating expenses incurred
 by Catapulse Inc., and related adjustments for income taxes.
 
     The following table reflects the differences between pro forma and as-
 reported net income (in thousands):
 
                              Three months ended          Fiscal year ended
                                   March 31                   March 31
                                 (unaudited)
                              2001         2000         2001          2000
 
     As reported net income  $6,561       $25,916      $72,144       $85,314
 
     Activity relating
      to Catapulse:
      Deferred compensation     389           281        1,989           281
      Research and
       development expenses   4,281         3,424       31,853         3,938
      Sales and marketing
       expenses                 794             -        8,817             -
      General and
       administrative expenses  436             -        3,396             -
      Interest earned on
       cash and cash
       equivalents            (151)         (974)      (2,882)       (1,229)
      Minority interest     (1,888)       (1,084)     (15,323)       (1,084)
     Total Catapulse
      activity, net of
      minority interest       3,861         1,647       27,850         1,906
 
     Amortization of
      goodwill and purchased
      intangibles, net of
      tax, relating to
      recent acquisitions    12,436         3,788       24,598         3,788
 
     Amortization of
      stock based
      compensation,
      net of tax              7,219             -        7,219             -
 
     Purchased in-process
      R&D relating to
      recent acquisitions    15,822         3,529       15,822         3,529
 
     Pro forma net income   $45,899       $34,880     $147,633       $94,537
 
 
                         Rational Software Corporation
                Condensed Consolidated Statements of Operations
          (in thousands, except percentage figures and per share data)
 
                                     Three months ended March 31
                                              (unaudited)
                             2001             %         2000             %
 
     Net product revenue   $141,565            59     $114,393            63
     Consulting and
      support revenue       100,115            41       66,026            37
       Total revenue        241,680           100      180,419           100
 
     Cost of product
      revenue                 9,838             4        8,519             5
     Cost of consulting and
      support revenue        25,907            11       19,797            11
       Total cost of
        revenue              35,745            15       28,316            16
       Gross margin         205,935            85      152,103            84
 
     Product research and
      development expenses   52,411            22       32,379            18
     Sales and marketing
      expenses               93,417            39       65,476            36
     General and
      administrative
      expenses               12,350             4       13,535             7
     Amortization of
      goodwill and
      purchased intangibles  12,204             5        3,120             2
     Amortization of
      stock based
      compensation           12,032             5            -             -
     Purchased
      in-process R&D         15,822             7        3,529             2
       Total operating
        expenses            198,236            82      118,039            65
       Operating income       7,699             3       34,064            19
     Other income, net        9,757             4        4,332             2
     Income before
      income taxes           17,456             7       38,396            21
     Provision for
      income taxes           12,783             5       13,564             7
     Minority interest      (1,888)           (1)      (1,084)           (1)
     Net income              $6,561             3      $25,916            15
 
     Net income per
      common share - basic    $0.03                      $0.14
     Shares used in
      computing per share
      amounts - basic       195,336                    179,394
     Net income per
      common share - diluted  $0.03                      $0.13
     Shares used in
      computing per share
      amounts - diluted     211,923                    197,816
 
                                          Year ended March 31
                              2001           %          2000             %
 
     Net product revenue   $477,726            59     $354,497            62
     Consulting and
      support revenue       337,209            41      217,693            38
       Total revenue        814,935           100      572,190           100
 
     Cost of product
      revenue                32,817             4       27,297             5
     Cost of consulting and
      support revenue        89,227            11       59,607            10
       Total cost of
        revenue             122,044            15       86,904            15
       Gross margin         692,891            85      485,286            85
 
     Product research and
      development expenses  185,497            23      102,846            18
     Sales and marketing
      expenses              330,128            41      220,529            38
     General and
      administrative
      expenses               48,567             5       47,124             8
     Amortization of
      goodwill and
      purchased intangibles  22,370             3        3,120             1
     Amortization of
      stock based
      Compensation           12,032             1            -             -
     Purchased
      in-process R&D         15,822             2        3,529             1
       Total operating
        expenses            614,416            75      377,148            66
       Operating income      78,475            10      108,138            19
     Other income, net       34,709             4       12,857             2
     Income before
      income taxes          113,184            14      120,995            21
     Provision for
      income taxes           56,363             7       36,765             6
     Minority interest     (15,323)           (2)      (1,084)             -
     Net income             $72,144             9      $85,314            15
 
     Net income per
      common share - basic    $0.38                      $0.49
     Shares used in
      computing per share
      amounts - basic       188,566                    175,458
     Net income per
      common share - diluted  $0.35                      $0.45
     Shares used in
      computing per share
      amounts - diluted     206,211                    191,274
 
                         Rational Software Corporation
                     Condensed Consolidated Balance Sheets
                                 (in thousands)
                                                    March 31,March 31,
                                                      2001             2000
     Assets
      Current assets:
       Cash and cash equivalents and short-term
        investments                                $1,040,821       $906,311
       Accounts receivable, net                       206,099        148,818
       Prepaid expenses and other assets               21,902         10,671
       Deferred tax asset                              16,727          9,384
        Total current assets                        1,285,549      1,075,184
 
     Property and equipment, net                      103,239         52,440
     Goodwill and purchased intangibles               294,824         54,064
     Long term deferred tax assets                    142,608         26,292
     Other assets, net                                 25,711         17,796
     Total assets                                  $1,851,931     $1,225,776
 
     Liabilities and stockholders' equity
      Current liabilities:
       Accounts payable                               $23,909         $8,496
       Accrued employee benefits                       68,624         49,290
       Income taxes payable                            30,788         24,323
       Other accrued expenses                          49,753         33,257
       Accrued merger and integration expenses         44,854          5,147
       Deferred revenue                               166,531        122,813
        Total current liabilities                     384,459        243,326
 
     Convertible subordinated notes                   500,000        500,000
     Long term deferred tax liabilities               200,508              -
     Other noncurrent liabilities                         710          1,668
        Total liabilities                           1,085,677        744,994
 
     Minority interest                                      -         24,475
 
     Stockholders' equity:
      Common stock                                    754,809        517,006
      Retained earnings/(Accumulated deficit)          11,445       (60,699)
        Total stockholders' equity                    766,254        456,307
     Total liabilities and stockholders' equity    $1,851,931     $1,225,776
 
     The word "Rational" and Rational's products are trademarks of Rational
 Software Corporation. References to other companies and their products use
 trademarks owned by the respective companies and are for reference purposes
 only.
     For more information contact:
      Rational Software Corporation, 18880 Homestead Road, Cupertino, CA 95014
      Tel. (408) 863-9900 or (800) 728-1212; Fax (408) 863-4133
      Fax-on-demand: 1-800-758-5804 Pin: 113375
      E-mail: info@rational.com; Web: www.rational.com
 
 

SOURCE Rational Software Corporation
    CUPERTINO, Calif., April 17 /PRNewswire/ -- Rational Software Corporation
 (Nasdaq:   RATL), the e-development company, today announced results for the
 fourth fiscal quarter and fiscal year ended March 31, 2001.
     Revenue for the fourth quarter and fiscal year ended March 31, 2001 was
 $241.7 million and $814.9 million, respectively, compared to $180.4 million
 and $572.2 million respectively, for the same periods last year.  This
 reflects an increase in fourth quarter and fiscal year revenues of 34% and
 42%, respectively, compared to the same periods last year.
     The company reported pro forma net income and earnings per share on a
 diluted basis for the fourth quarter ended March 31, 2001 of $45.9 million and
 $0.22, respectively, compared to pro forma net income and earnings per share
 of $34.9 million and $0.18, respectively, for the same period last year.  This
 reflects an increase in fourth quarter pro forma net income of 32% compared to
 the same period last year.
     "Rational's fourth quarter caps off a remarkable year for the company,
 with year-to-year growth of more than 40%," said Paul Levy, chairman and co-
 founder of Rational Software.  "The recent macroeconomic environment, however,
 did present us with a challenging fourth quarter.  Even in this tough economic
 environment, we saw excellent focus and tactical execution from all parts of
 the company, and in particular from our field sales teams around the world."
     "Our mission remains the same: help customers build software better and
 faster," said Levy.  "We believe that companies who depend on software for
 their success will continue to depend on Rational."
     The company reported pro forma net income and earnings per share on a
 diluted basis for the year ended March 31, 2001 of $147.6 million and $0.72,
 respectively, compared to pro forma net income and earnings per share of $94.5
 million and $0.49, respectively, for fiscal 2000.  This reflects an increase
 in fiscal year net income of 56% compared to fiscal 2000.
     Pro forma net income and earnings per share for the periods reported
 exclude one-time charges for purchased in-process R&D, amortization of
 goodwill and purchased intangibles and amortization of stock-based
 compensation related to recent acquisitions, as well as the net activity
 (operating expenses and interest income less portion allocated to minority
 interest) incurred by Catapulse, Inc. prior to the completion of the Catapulse
 acquisition on February 5, 2001.
     As reported net income and earnings per share on a diluted basis for the
 fourth quarter ended March 31, 2001 was $6.6 million and $0.03, respectively,
 compared to as reported net income and earnings per share of $25.9 million and
 $0.13, respectively, for the same period last year.
     As reported net income and earnings per share on a diluted basis for the
 year ended March 31, 2001 was $72.1 million and $0.35, respectively, compared
 to as reported net income and earnings per share of $85.3 million and $0.45,
 respectively, for fiscal 2000.
 
     Statements contained in this press release may include "forward looking"
 statements within the meaning of the Private Securities Litigation Reform
 Act of 1995, particularly statements in this press release relating to
 continued dependence on the company.  The actual future results of the
 company could differ materially from those described herein.  Certain risks
 which could cause actual results to differ materially include competition in
 the marketplace and dependence by the company on the growth of the market
 for sophisticated software development tools.  For a more complete list of
 risk factors, see our recent filings with the Securities and Exchange
 Commission.
 
     About Rational Software Corporation
     Rational Software Corporation (Nasdaq:   RATL), the e-development company,
 helps organizations develop and deploy software for e-business,
 infrastructure, and devices and embedded systems through a combination of
 tools, services and software engineering best practices.  Rational's e-
 development solution helps organizations overcome the software development
 paradox by accelerating time to market while improving quality.  Rational's
 integrated solution simplifies the process of acquiring, deploying and
 supporting a comprehensive software development platform, reducing total cost
 of ownership.  IDC has recognized Rational as the revenue leader in multiple
 application development and deployment markets for four years in a row.
 Founded in 1981, Rational, one of the world's largest software companies, had
 revenues of $815 million in its fiscal year ended March, 2001 and employs more
 than 3,700 people around the world.  Rational is a component of the Nasdaq-100
 Index(R).  Additional information is available on the Internet at
 www.rational.com .
 
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20010417/RATLLOGO )
 
 
                         Rational Software Corporation
                       Pro Forma Statements of Operations
          (in thousands, except percentage figures and per share data)
 
                                      Three months ended March 31
                                              (unaudited)
                              2001            %         2000             %
 
     Net product revenue   $141,565            59     $114,393            63
     Consulting and
      support revenue       100,115            41       66,026            37
       Total revenue        241,680           100      180,419           100
 
     Cost of product
      revenue                 7,531             3        7,851             4
     Cost of consulting and
      support revenue        25,907            11       19,797            11
       Total cost of
        revenue              33,438            14       27,648            15
       Gross margin         208,242            86      152,771            85
     Product research and
      development expenses   47,741            20       28,674            16
     Sales and marketing
      expenses               92,623            38       65,476            36
     General and
      administrative
      expenses               11,914             5       13,535             8
       Total operating
        expenses            152,278            63      107,685            60
       Operating income      55,964            23       45,086            25
 
     Other income, net        9,606             4        3,358             2
 
     Income before income
      taxes                  65,570            27       48,444            27
     Provision for income
      taxes                  19,671             8       13,564             8
     Net income             $45,899            19      $34,880            19
 
     NOTE:  PRO FORMA ONLY
     Net income per
      common share - basic    $0.23                      $0.19
     Shares used in
      computing per share
      amounts - basic       195,336                    179,394
     Net income per
      common share - diluted  $0.22                      $0.18
     Shares used in
      computing per share
      amounts - diluted     211,923                    197,816
 
                                          Year ended March 31
                             2001             %         2000             %
 
     Net product revenue   $477,726            59     $354,497            62
     Consulting and
      support revenue       337,209            41      217,693            38
       Total revenue        814,935           100      572,190           100
 
     Cost of product
      revenue                28,514             3       26,629             5
     Cost of consulting and
      support revenue        89,227            11       59,607            10
       Total cost of
        revenue             117,741            14       86,236            15
       Gross margin         697,194            86      485,954            85
     Product research and
      development expenses  151,655            19       98,627            17
     Sales and marketing
      expenses              321,311            39      220,529            39
     General and
      administrative
      expenses               45,171             6       47,124             8
       Total operating
        expenses            518,137            64      366,280            64
       Operating income     179,057            22      119,674            21
 
     Other income, net       31,827             4       11,628             2
 
     Income before income
      taxes                 210,884            26      131,302            23
     Provision for income
      taxes                  63,251             8       36,765             6
     Net income            $147,633            18      $94,537            17
 
     NOTE:  PRO FORMA ONLY
     Net income per
      common share - basic    $0.78                      $0.54
     Shares used in
      computing per share
      amounts - basic       188,566                    175,458
     Net income per
      common share - diluted  $0.72                      $0.49
     Shares used in
      computing per share
      amounts - diluted     206,211                    191,274
 
     The above pro forma statements of operations for the quarter and year
 ended March 31, 2001 have been adjusted to present the Company's operating
 results excluding acquisition costs related to recent acquisitions, (including
 amortization of goodwill and purchased intangibles, amortization of stock
 based compensation and purchased in-process R&D) operating expenses incurred
 by Catapulse Inc., and related adjustments for income taxes.
 
     The following table reflects the differences between pro forma and as-
 reported net income (in thousands):
 
                              Three months ended          Fiscal year ended
                                   March 31                   March 31
                                 (unaudited)
                              2001         2000         2001          2000
 
     As reported net income  $6,561       $25,916      $72,144       $85,314
 
     Activity relating
      to Catapulse:
      Deferred compensation     389           281        1,989           281
      Research and
       development expenses   4,281         3,424       31,853         3,938
      Sales and marketing
       expenses                 794             -        8,817             -
      General and
       administrative expenses  436             -        3,396             -
      Interest earned on
       cash and cash
       equivalents            (151)         (974)      (2,882)       (1,229)
      Minority interest     (1,888)       (1,084)     (15,323)       (1,084)
     Total Catapulse
      activity, net of
      minority interest       3,861         1,647       27,850         1,906
 
     Amortization of
      goodwill and purchased
      intangibles, net of
      tax, relating to
      recent acquisitions    12,436         3,788       24,598         3,788
 
     Amortization of
      stock based
      compensation,
      net of tax              7,219             -        7,219             -
 
     Purchased in-process
      R&D relating to
      recent acquisitions    15,822         3,529       15,822         3,529
 
     Pro forma net income   $45,899       $34,880     $147,633       $94,537
 
 
                         Rational Software Corporation
                Condensed Consolidated Statements of Operations
          (in thousands, except percentage figures and per share data)
 
                                     Three months ended March 31
                                              (unaudited)
                             2001             %         2000             %
 
     Net product revenue   $141,565            59     $114,393            63
     Consulting and
      support revenue       100,115            41       66,026            37
       Total revenue        241,680           100      180,419           100
 
     Cost of product
      revenue                 9,838             4        8,519             5
     Cost of consulting and
      support revenue        25,907            11       19,797            11
       Total cost of
        revenue              35,745            15       28,316            16
       Gross margin         205,935            85      152,103            84
 
     Product research and
      development expenses   52,411            22       32,379            18
     Sales and marketing
      expenses               93,417            39       65,476            36
     General and
      administrative
      expenses               12,350             4       13,535             7
     Amortization of
      goodwill and
      purchased intangibles  12,204             5        3,120             2
     Amortization of
      stock based
      compensation           12,032             5            -             -
     Purchased
      in-process R&D         15,822             7        3,529             2
       Total operating
        expenses            198,236            82      118,039            65
       Operating income       7,699             3       34,064            19
     Other income, net        9,757             4        4,332             2
     Income before
      income taxes           17,456             7       38,396            21
     Provision for
      income taxes           12,783             5       13,564             7
     Minority interest      (1,888)           (1)      (1,084)           (1)
     Net income              $6,561             3      $25,916            15
 
     Net income per
      common share - basic    $0.03                      $0.14
     Shares used in
      computing per share
      amounts - basic       195,336                    179,394
     Net income per
      common share - diluted  $0.03                      $0.13
     Shares used in
      computing per share
      amounts - diluted     211,923                    197,816
 
                                          Year ended March 31
                              2001           %          2000             %
 
     Net product revenue   $477,726            59     $354,497            62
     Consulting and
      support revenue       337,209            41      217,693            38
       Total revenue        814,935           100      572,190           100
 
     Cost of product
      revenue                32,817             4       27,297             5
     Cost of consulting and
      support revenue        89,227            11       59,607            10
       Total cost of
        revenue             122,044            15       86,904            15
       Gross margin         692,891            85      485,286            85
 
     Product research and
      development expenses  185,497            23      102,846            18
     Sales and marketing
      expenses              330,128            41      220,529            38
     General and
      administrative
      expenses               48,567             5       47,124             8
     Amortization of
      goodwill and
      purchased intangibles  22,370             3        3,120             1
     Amortization of
      stock based
      Compensation           12,032             1            -             -
     Purchased
      in-process R&D         15,822             2        3,529             1
       Total operating
        expenses            614,416            75      377,148            66
       Operating income      78,475            10      108,138            19
     Other income, net       34,709             4       12,857             2
     Income before
      income taxes          113,184            14      120,995            21
     Provision for
      income taxes           56,363             7       36,765             6
     Minority interest     (15,323)           (2)      (1,084)             -
     Net income             $72,144             9      $85,314            15
 
     Net income per
      common share - basic    $0.38                      $0.49
     Shares used in
      computing per share
      amounts - basic       188,566                    175,458
     Net income per
      common share - diluted  $0.35                      $0.45
     Shares used in
      computing per share
      amounts - diluted     206,211                    191,274
 
                         Rational Software Corporation
                     Condensed Consolidated Balance Sheets
                                 (in thousands)
                                                    March 31,March 31,
                                                      2001             2000
     Assets
      Current assets:
       Cash and cash equivalents and short-term
        investments                                $1,040,821       $906,311
       Accounts receivable, net                       206,099        148,818
       Prepaid expenses and other assets               21,902         10,671
       Deferred tax asset                              16,727          9,384
        Total current assets                        1,285,549      1,075,184
 
     Property and equipment, net                      103,239         52,440
     Goodwill and purchased intangibles               294,824         54,064
     Long term deferred tax assets                    142,608         26,292
     Other assets, net                                 25,711         17,796
     Total assets                                  $1,851,931     $1,225,776
 
     Liabilities and stockholders' equity
      Current liabilities:
       Accounts payable                               $23,909         $8,496
       Accrued employee benefits                       68,624         49,290
       Income taxes payable                            30,788         24,323
       Other accrued expenses                          49,753         33,257
       Accrued merger and integration expenses         44,854          5,147
       Deferred revenue                               166,531        122,813
        Total current liabilities                     384,459        243,326
 
     Convertible subordinated notes                   500,000        500,000
     Long term deferred tax liabilities               200,508              -
     Other noncurrent liabilities                         710          1,668
        Total liabilities                           1,085,677        744,994
 
     Minority interest                                      -         24,475
 
     Stockholders' equity:
      Common stock                                    754,809        517,006
      Retained earnings/(Accumulated deficit)          11,445       (60,699)
        Total stockholders' equity                    766,254        456,307
     Total liabilities and stockholders' equity    $1,851,931     $1,225,776
 
     The word "Rational" and Rational's products are trademarks of Rational
 Software Corporation. References to other companies and their products use
 trademarks owned by the respective companies and are for reference purposes
 only.
     For more information contact:
      Rational Software Corporation, 18880 Homestead Road, Cupertino, CA 95014
      Tel. (408) 863-9900 or (800) 728-1212; Fax (408) 863-4133
      Fax-on-demand: 1-800-758-5804 Pin: 113375
      E-mail: info@rational.com; Web: www.rational.com
 
 SOURCE  Rational Software Corporation

RELATED LINKS

http://www.rational.com